European shares edge higher, Novartis leads drugmakers

Mon Sep 1, 2014 12:45pm EDT

* FTSEurofirst 300 index closes 0.2 percent higher

* Media stocks up on M&A speculation related to ITV

* Novartis boosts drugmakers on new drug prospects

By Atul Prakash

LONDON, Sept 1 (Reuters) - European shares edged higher to close near a recent one-month peak on Monday, with merger and acquisition speculation about British broadcaster ITV helping media stocks and Novartis leading drugmakers.

Novartis, up 4.3 percent, was the top gainer on the FTSEurofirst 300 index on news a new medicine from the company could replace drugs that have been central to treating heart disease for a quarter of century. The Novartis advance helped the STOXX Europe 600 Healthcare index to gain the most of any sector, at 1.1 percent.

ITV led the European media index higher, up 0.8 percent. The Telegraph reported that Liberty Global was canvassing support from major ITV shareholders after it acquired a 6.4 percent stake, raising speculation of a full takeover bid. ITV declined to comment.

"We are likely to see M&A activities in other sectors also, as companies are looking to utilise their cash balances," said Keith Bowman, an equity analyst at Hargreaves Lansdown.

"But investors will stay cautious as geopolitical concerns and uncertainty about the ECB's likely policy moves will remain in the background."

Broker Liberum said ITV was its top media pick and still had plenty of upside in its share price. Any bid for the company should reflect the potential upside from ITV's being allowed to charge re-transmission revenues for ITV1, Liberum said.

The FTSEurofirst 300 index ended 0.2 percent higher at 1,376.83 points, just below last week's one-month high. The Euro STOXX 50, which will add Nokia from Sept. 22, replacing CRH after an index reshuffle, was up 0.1 percent. CRH fell 0.7 percent and Nokia dropped 1.4 percent.

CAUTIOUS TRADE

Investors traded cautiously amid lingering tension in Ukraine, weak economic data from China and lower volumes because of a public holiday in the United States. Thursday's meeting of the European Central Bank also loomed.

ECB sources told Reuters last week new action was unlikely but not impossible. They said the barrier to some kind of quantitative easing was still "very high".

"At least for now, quantitative easing hopes seems to trump absolutely everything, including sharply escalating tensions in Ukraine and weak Chinese PMI figures," said Markus Huber, a trader at Peregrine & Black.

Tension in Ukraine continued to be felt in the market, with Raiffeisen falling 2.3 percent on concerns about further sanctions against Russia. Raiffeisen has 2.8 million customers in Russia, one of the country's top 10 banks.

The tension also affected leading economic indicators, with a business survey showing that euro zone manufacturing growth slowed more than initially thought last month, as new orders dwindled and factories suffered.

Among other individual movers, Iliad fell 8.8 percent after the French low-cost telecom operator said it would continue its pursuit of T-Mobile US, even though the owner of the U.S. mobile operator, Deutsche Telekom, had rebuffed its first bid as too low.

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Francesco Canepa; Editing by Ralph Boulton)

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